We know buying a custom home in 2023 can be a bit of a stressful situation. Interest rates are up, demand is up, and supply is down. It is a true sellers’ market, or at least it was. Toward the latter part of 2022, we saw prices start to flatten out, and as we get to the end of the first quarter, that trend has continued.
Trevor Gearin, a real estate agent with Century 21, stated, “It’s not as crazy as it was. Six months ago, the buyers didn’t have a chance to think. Now we’re seeing buyers being able to negotiate a little.”
The reality of the situation is that home buyers right now are finally getting some normalcy to the market. In 2021, home prices increased by 18.2 percent. That trend continued in 2022, with a 9.6 percent year-over-year increase in pricing. I have friends who moved in 2020 and rented to see if they would like the area that are now kicking themselves for not having bought at that time. In one area, a townhouse that was selling for $425,000 is now selling for more than $700,000.
Point being, although housing prices are far higher than they were just a few years ago, the market is definitely settling down, and there are going to be ways for you to recuperate some of those costs, especially if you are doing a custom build. For instance, you can start working with the builder to offer free or discounted upgrades to the home. If they are having problems moving homes, they are far more likely to make a little less on an upgrade than they are to lose the sale altogether.
As we mentioned in our last report, having your closing costs paid by the builder is also on the table right now, which can lead to significant savings right out of the gate for the new homeowner. Typically, closing costs are somewhere between two and five percent, so on a $750,000 home, you could be talking anywhere from $15,000 to $37,500 in savings.
With interest rates significantly higher than they were just a few years ago, make sure your credit report is in good shape. If not, work on it before you decide to jump into the market. Raising your credit by just 10 points can save you tens of thousands of dollars over the course of the mortgage.